How often do you hear of hedge funds or traders blowing up? How often do you hear of hedge funds or traders making an amazing 100% + return for the year? You read these kinds of news headlines every week…”XYZ Hedge Fund Trader cripples firm after gold market bets go wrong” or “XYZ Hedge Fund Trader hits it big betting on oil market decline”.

Today I am going to discuss something that most Wall Street hedge fund veterans would agree with. “Your next trade could potentially make you or break you”.

Most of the major Forex pairs have been in strong trends in recent times. During such trends, one big trade can literally make your entire month, year or decade in the market. It can erase any recent losses and bank you a very nice profit at the same time. On the flip side, one bad trade or trading error can seriously damage your trading account or even blow it up completely. Thus, one trade can literally either make or break your trading account.

The human mind is imperfect and can easily become overly-emotional when trading the market. Any trader is literally just ‘one bad decision’ away from blowing out their trading account or one ‘great decision’ away from multiplying their account 50, 100 or 1000 %. It’s only through proper preparation, planning and execution that you can avoid getting too burned by any one particular trade you take. Perhaps ironically, those same things; proper preparation, planning and execution are also what you need to set yourself up to have big account-making long term steady wins in the market.

Let’s discuss some ways you can avoid letting any one trade ‘break’ your trading account while at the same time putting yourself in a position to hit big winners in the market…

Don’t allow one trade to ‘break’ you

If you’ve ever played a competitive match of tennis with someone close to your same skill level, you probably already understand how much of a burden unforced errors are to your game. In fact, it’s usually unforced errors that will cause you to lose in a game like tennis if you’re close to evenly matched with your opponent. In other words, you defeat yourself. This is perhaps even more frustrating than just getting blown-out because your opponent is better than you. Beating yourself, so to speak, is just the worst. Feeling. Ever.

As you may well know by now, one poorly managed trade can seriously damage your trading account, or even blow it out completely. Perhaps more so than any other profession or sport in the world, trading is the ultimate arena for people to commit unforced errors and hurt themselves in. After all, if you lose money on a trade you knew was ‘stupid’ and shouldn’t have entered, you have no one to blame but yourself. Putting yourself into this position of committing unforced trading errors and losing money because of it, can set in motion a toxic cycle of losses and emotional trading that creates the mental environment capable of causing you to get blown-out by one bad trade.

Thus, the best way to avoid going ‘broke’ from a bad loss or a poorly managed trade, is to just avoid all the unforced errors of trading. If you avoid putting yourself in the toxic trading mindset that unforced trading errors induces, you will greatly reduce and likely eliminate your chances of getting hurt badly by any one loss.

Thus, some of the unforced errors you need to avoid are:

Trading when you know there’s no reason to. Trading just because you ‘feel like you want to’, is very dangerous. It’s analogous to a gambling addict not being able to leave the casino because he can ‘feel’ the next big win is around the corner. Don’t be that guy who is up all night glued to his screen while his wife and kids are sleeping. Go to bed, avoid the markets when there’s nothing there to trade. The market will be there tomorrow.

Giving back profits. This is a big one. The feeling of euphoria after a nice winning trade can feel great, and it seems like a positive feeling. However, it can be a very sneaky emotion to a trader that can cause a lot of harm, sort of ‘under the radar’. Traders tend to get wide-eyed and overly-confident after a nice winner, they suddenly feel ‘special’ and believe they can see ‘opportunities’ easier in the market. However, what really is happening is that their perception of risk in the market has been lessened by the money they just made. Trading suddenly seems ‘easy’ for the time being and so they become less aware of the risk involved. What happens next is that they enter another trade right away or soon after taking their winnings. This next trade is usually a loser since it was entered on pure emotion (euphoria), not on logic and planning. In this way, traders give back profits that they otherwise would have kept. Thus unforced error can set off a chain-reaction of emotional trading mistakes that can quickly lead to that one big losing trade that blows out your account.

Cranking risk up too high. This one is obvious, but it tends to happen often and typically traders make this unforced error after a winning trade. As I just discussed above, the euphoria of a winning trade can be very dangerous. It makes us want to jump back into the market for no reason whatsoever, and it is typically accompanied by a desire to crank up one’s risk to a level higher than what they are comfortable with potentially losing. I don’t need to tell you how that sets you up for a big ‘break you’ trade, it’s fairly obvious. However, let’s just say, when you crank your risk up beyond what you’re comfortable with, you’re setting yourself up for disaster when the next losing trade hits.

Thus, the best way to avoid being ‘broken’ by any one trade, is to avoid all the unforced trading errors that are the downfall of most traders. If you do that, you’ll avoid entering into that toxic trading mindset of feeling like you ‘need to trade’ all the time.

One big trade can ‘make’ you

We just discussed different mistakes that can lead to the type of toxic trading mindset that can put you in position to allow one trade to break your trading account. Let’s flip gears now and discuss how to put yourself into a position where one big winner can make your entire month or more in the market.

Simply put, a properly managed trade following an established trend can yield you enough profits to pay for the entire year or more.

How’s this possible you ask? It’s simple…

If you’ve been following me for a while, you know I subscribe to the ‘sniper trading method’ in which I take minimal trades per month. Whilst I don’t trade often, maybe 2 to 8 times per month, the trades I do take are high-probability well planned positions.

Once you have the training, the know-how / trading skill and the proper trading mindset, trading really just becomes a waiting game. Lying in wait for that ‘easy prey’ of a trade to come staggering along in front of you, ripe for the taking. At that point, it’s all just about execution.

An example of one big trade making your whole trading month or even year, is a trade in a trending market that you’ve scaled into as it moves in your favor. Checkout this article on pyramiding to increase profits, to learn more about pyramiding, or scaling into trades. Even a trade that you’ve pyramided just two or three positions on, if it’s a strong trend and you give the trade room to run, you can make some serious money on it. Granted, these types of market conditions and trades won’t appear very often, but that’s really the whole point; they don’t need to.

What needs to happen for you to profit on these once-a-month or maybe only even once-a-quarter trades, is preparation and planning.

You first need to know exactly what you’re looking for in the market. This can be achieved by learning and mastering an effective trading strategy like the price action strategy you can learn in my trading course. After that, you need a plan of attack (also in my course). Your trading plan is where you bring everything together that you’ve learned into a concise yet comprehensive guide that will remind you how and what you’re supposed to be doing in the market.

After that, you just lie in wait for that highly-confluent (easy prey) trade setup, and then when it forms, you will be ready, and you won’t hesitate. You will pounce with decisiveness and execute your trading plan flawlessly.

The great thing about trading in this prepared and planned manner, is that it builds and reinforces good trading habits. Once you get rewarded by trading with proper preparation and planning, it will form a habit within you that will be more and more difficult to break. Thus, you move further away from that toxic mindset that can lead to one trade blowing you out and closer to that proper trading mindset where you’re literally trading ‘in the zone’ and putting yourself in a position to make a monster profit off just one trade.

Conclusion

In the end, it all comes back to this main point: One trade, one event in the market can ultimately decide your fate for that month, quarter or even year. So, not only do we need to be aware of this, we need to plan so that we don’t put ourselves in a mental state where one trade can lead to disaster and blow out our account. Instead, we need to prepare, plan and act with consistent discipline so that our mental state is one which primes us for that big winner that yields a monster profit. Just remember, the first time you hit that big winner, whatever you do, don’t frivolously give that profit back to the market.

Great Article, you have make me wait for your article every week.
This one is one of the best. An strategy to make 100 to 1000 is this one, wait for trade for weeks to align with Fundamentals & Technicals and when they align you don’t eat breakfast but you eat Six Month’s food in one trade by risking only what you are comfortable with.

Great article to commence 2015 on the right trading path. I love you Nial and thanks a great deal for sharing your trading wisdom so selflessly. Education + mindset is the key. I have set my goal for this year and i am confident that with God, and your mentoring advice, i will accomplish my target.

Wow, Nial. I don’t know how you do it but every time I take a wrong move along comes your weekly email almost telling me exactly what I did wrong. Early last week I decided to try a few lots on an oil short. It went very well and I made a great profit on it. I was euphoric! I was so excited I tried again. Loss. And again. Loss. Oil had turned around but I was ‘convinced’ it would still fall. No way, Jose. All the profit I’d made went within about 7 trades. Stupid! I will not be doing this again.
I decided to go back to school and learn some more.
Thanks for your articles. They’re absolute gems.
Andy Moore

“One trade can make or break you” Tell me about it my matey. Despite all the hype for USD I have been shorting USD/CHF for the past week. Yesterday I a made a small fortune when CHF went ballistic! My secret? – Do my own research and ignore the news! Great start to 2015! What you say Nial is spot on!

Always good advice Nial.
Adding to your article, spread your risk over multiple accounts and minimal 3 brokers. This is first level risk and money management.
Decrease risk dramatically in this high volatility times or do not trade at all and wait when the storm is over. There are going to be plenty of new opportunities after this volatility storm.

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